The European Strategy: Send Money to the US

So a lot is going on in the EU on the intellectual property front these days! Let’s run down the past six weeks or so.

Our last post was about the release of the Hargreaves Review, the UK government funded study of IP policy in the digital economy that called out a lot of bad industry research, made some good recommendations for reform, and punted on enforcement. This followed on the heels of a British court ruling against a group of local ISPs, who were challenging the Digital Economy Act on the grounds that it was incompatible with wider European law. The ‘three strikes’ provisions of the act are now likely to go forward.

In late April, French President Sarkozy said that France’s as-yet-untested HADOPI (aka ‘3 strikes’) measures designed to disconnect repeat infringers were a mistake, then hosted an ‘e-G8′ conference framed around an ostensible need to “civilize” the Internet, by which he mostly meant getting tougher on piracy. Meanwhile, the company responsible for collecting data on infringement for the HADOPI initiative, Trident Media Guard was hacked, revealing internet user data and an apparently wide array of security flaws. This triggered a suspension of HADOPI surveillance and, potentially, the HADOPI agency’s much more ambitious plans to monitor consumer internet use.

Last week, the European Commission released it’s IP Strategy paper, which features a very sensible call for a unified European market for IP rights (as opposed to the 27 separate national markets that make the audiovisual sector dysfunctional within Europe), but which also makes some very broad gestures toward increased enforcement, with the objective of:

tackling the infringements at their source and, to that end, foster cooperation of intermediaries, such as internet service providers, while being compatible with the goals of broadband policies and without prejudicing the interests of end consumers. The Commission will ensure that such amendments respect all fundamental rights recognised by the EU Charter of Fundamental Rights, in particular also the rights to private life, protection of personal data, freedom of expression and information and to an effective remedy.

This paragraph condenses–and breezes through–all the major tensions that will shape EU enforcement policy in the next years, including ongoing efforts to shift the burden of enforcement onto ISPs; the emerging conflict between the “fundamental” rights of privacy, freedom of expression, and due process (aka, “an effective remedy before a tribunal”) on one side and the protection of intellectual property on the other; and the elision of the inconvenient fact that the ‘end consumers’ whose rights need to be protected are also the ‘source’ of the infringements that need to be combatted. One important round of this struggle is currently playing out in the European Court of Justice, which so far seems inclined to prioritize individual privacy over rights holder-driven internet surveillance. The new strategy document points the way forward on anticipated revisions of the EU Enforcement Directive, first passed in 2004.

One sad footnote to the paper: in introducing the strategy, Michel Barnier, Financial Services Commissioner for the European Commission, justified the need for stronger enforcement by citing the loss of 185,000 jobs and 10 billion euros in 2008. Where do these numbers come from? From the thoroughly discredited but apparently unsinkable BASCAP/TERA report, about which the UK commission has offered perhaps the most generous assessment in noting that “there are methodological limitations and omissions at each stage of calculation which means it is problematic as evidence for policymaking.” EC guys, use of this stuff raises serious concerns about your credibility. It’s transparent Lobbynomics.

There’s also a conversation–maybe fight is the better word–between the (elected) European Parliament and the (bureaucratic) European Commision about how and whether to ratify the ACTA agreement, the product of the most recent round of industry forum shopping for stronger IP enforcement. Although there are disagreements within the Parliament on the substance of ACTA, the real sticking point has been about the separation of powers within the EU as the Parliament tries to assert its authority over the (unelected) Commission on major policy issues. In this case, the Parliament has requested a ruling from the European Court of Justice on the legality of ACTA under EU law–an interesting prospect given the ECJ’s record described above. Industry groups have mobilized to short circuit that plan, hoping for a quick vote.

And last but not least, there is the (probably ongoing) fight about copyright term extension for recordings. The Parliament passed a term extension (from 50 to 70 years) last month, but the bill is now hung up in the Council of Ministers – a sort of member-country appointed Senate with a complicated vote weighting system. I’d be quite interested to learn what the alleged blocking minority–Slovenia, Portugal, Austria, Netherlands, Sweden, Slovakia, Denmark, Belgium, Finland, Romania–have in common on these issues.

I haven’t followed EU IP politics very closely in the last few years because the European Commission has consistently played second banana to the US (and USTR) in pushing stronger IP norms and enforcement on the developing world. Accordingly, the EC just wasn’t very relevant to the main subjects of our report–Brazil, India, Russia, and so on. But we do have a lot to say on the economic impact of piracy in general and on the research methods used to estimate it in particular. So it was a real treat to be invited (with Pedro Mizukami) to present some of this work at the European Parliament at this pivotal moment of debate. I’ve excerpted a couple sections from the much longer panel discussion below.

The first clip is a response to a question about losses to piracy. I make my usual effort to try to break the question down into the different industry sectors concerned, and point out that the EU acts under a basic misapprehension in regard to IP policy. In short, it acts like an IP exporter in the audiovisual and software fields, when it in fact is an IP importer and might be better served by the IP importer’s traditional posture of low IP protection and enforcement. In practice, this misapprehension means that European IP policy essentially pursues the interests of the US and its IP exporting film, music, and software industries.

The second clip is an attempt to set some minimum criteria for what a credible study of the economic impact of piracy would look like. This is relevant because the European Commission just wrote a check for 500,000 euros to the Rand Corporation to do exactly this. We’ll see if the Hargreaves report gives the Rand researchers enough cover to say they can’t really measure losses, or whether we get another exercise in Lobbynomics.

The overall video is 2 hrs long and not super effective without the accompanying slides. But here’s a summary put together by our hosts…

The trip also provided what was, for me, a fascinating window on party politics at the EU level, which is the leading edge of a still very nascent process of transnational political identity building.

We were invited by Marietje Schaake, a member of the Dutch liberal party D66, which is part of a larger centrist coalition called the Alliance of Liberals and Democrats. The Liberals and Democrats are very invested in competition policy and market integration in the EU–huge issues in an audiovisual market that is both highly balkanized in terms of rights clearance and highly concentrated in terms of ownership and market structure. But they also have a strong IP rights and enforcement contingent, and consequently have emerged as a swing vote on many IP and technology policy issues.

Generally speaking, the conservative parties have lined up for stronger IP norms and enforcement, the Socialists and Greens have opposed them, and the Liberal parties sit in the middle. But I have never heard a good explanation of why this is so. In the US, the situation is pretty straightforward: Hollywood owns the Democrats, big business owns the Republicans, and stronger IP policies are a happy overlap between these interests, making IP policy one of the last areas of consistent bipartisanship. In Europe, it’s by no means as clear to me why the party positions have lined up this way, as one could just as easily imagine a socialist commitment to the romantic author or a conservative rejection of subsidizing Hollywood. If anyone has a good account of how these coalitions have ended up where they are on these issues, I’d welcome a pointer.

ps. To be clearer, why would stronger enforcement in the EU produce an outflow of revenue to the US? Well, what’s being pirated? From Torrentfreak: